That's because a lot of real estate in the world really does offer higher returns than you can get pretty much anywhere else. London real estate for instance, has grown in value 5.3% in the last three months alone.

Compounded that's a more than respectable 20% for the year, almost double what the S&P usually returns over that same period. Buying real estate also requires less expertise than picking stocks (assuming you have enough capital to buy valuable real estate in the first place).

On the flip side, of course, investors are hard pressed to diversify risk in real estate. An S&P index fund can track dozens of companies – if not more – with a lot less capital. For instance, the largest SPDR S&P 500 ETF (SPY) tracks 501 companies in all the major industries. You get can a piece of all 501 for about $180 bucks a share.

Your house, on the other hand, can become worthless overnight in the event of a natural disastor, or if the neighborhood takes a turn for the worse. In fact, not counting tax incentives, real estate can be a pretty risky proposition.

Real estate investment trusts (REITs) offer one way to capture the returns of real estate investing while also adding a degree of diversification. They buy and maintain real estate assets and distribute profits to shareholders through dividends, which are often quite high.